Money Management

Hackers aren’t the only danger to your bank account funds. Here’s a key protection you need to make sure your money stays safe. [[{“value”:”

Banks have a lot of responsibilities — paying interest on savings accounts, giving out loans, and giving you access to your cash when you need it, to name a few. But their most important job has always been to keep your money safe. If they couldn’t do that, you’d have no reason to give them your funds at all.

There are several ways banks try to protect your money, including alerts of suspicious activities and encrypted account portals. But that doesn’t protect against all possible disasters. If you want your money to be truly protected, there’s something else you need, too.

Who’s going to protect you if your bank fails?

The safety features I described above work to protect you if someone attempts to hack into your account or the bank’s database to steal your funds. But that’s not the only way you can lose money in a bank account. You can also lose money if the bank itself fails and lacks the funds to pay its customers back.

It doesn’t happen often, although we saw this a few times last year, most notably with Silicon Valley Bank (SVB) and First Republic Bank. We’ve learned a lot since the Great Depression, when bank failures meant depositors who weren’t able to withdraw their cash were out of luck. Today, there’s a system in place to ensure that everyone gets their money back, even if their bank fails.

It’s called Federal Deposit Insurance Corporation (FDIC) insurance. Banks pay to maintain FDIC insurance so that if they go under, the FDIC will step in to ensure the safety of the depositors’ funds. If the bank is not able to pay back all that its depositors invested in it, the FDIC will either facilitate the now-defunct bank’s acquisition by another institution, which will then pay depositors back or hold their funds for them, or it will pay depositors directly.

How does FDIC insurance work?

There are limits on what FDIC insurance covers. First and foremost, it doesn’t insure investments, like stocks or bonds. It also doesn’t insure safety deposit boxes or their contents. It also limits the amount of coverage you have to $250,000 per bank, per depositor, per ownership category.

The ownership categories that pertain to most people are single accounts and joint accounts. Single accounts are accounts you own in just your name, while joint accounts are accounts you own with one or more people. The FDIC totals how much you have in the bank in that account category to determine how much is insured.

For example, if you had $150,000 in an individual checking account and $150,000 in an individual savings account, you’d only get $250,000 of insurance because they both fall into the single account ownership category at the same institution. This is true even though each account has less than $250,000 in it.

In the case of joint accounts, each owner gets $250,000 of coverage. So if you have a joint savings account with a partner, together, the two of you would have $500,000 of FDIC insurance between that and all your other jointly-owned accounts with the same bank.

How do you know if your bank is FDIC insured?

Pretty much any well-known bank you come across will have FDIC insurance. It’s a requirement for all banks that want to be part of the Federal Reserve System. This system gives banks access to several important services, so it’s worth it for them to pay for the insurance protection.

Most institutions will note that they’re FDIC insured in the footer of every page on their website. But if you want to be sure, you can search the institution’s name on the Federal Deposit Insurance Corporation website.

It’s not really necessary to check this if you’re working with a large, well-established bank, like Chase or Discover® Bank. But if you’re dealing with a little-known institution, it doesn’t hurt to run a check to make sure you’re dealing with a legitimate bank.

One other thing to note is that if you’re working with a credit union, you won’t have FDIC insurance. That’s only for banks. But you should receive National Credit Union Administration (NCUA) insurance instead. This works the same as FDIC insurance but it’s for credit unions. You can check if your credit union is insured on the NCUA website.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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Cashing in a CD early will result in a penalty. But it could make financial sense to do it. Learn what to expect when you cash out your CD early. [[{“value”:”

Life often serves up a buffet of tough choices. Stock values drop and investors have to decide if they’re worth keeping; home buyers, under market pressure, find a home (finally) then have to decide if it’s worth waiving the inspection; Triscuits go on sale and you have to decide if it’s worth paying extra for cheese.

Likewise, certificates of deposit (CD) could present a tough choice: If your money is locked up in one, should you cash out early? Although an emergency might compel you to make that decision, it’ll come with consequences. Here’s what happens when you cash out your CD early.

Breaking your CD contract will cost you in penalties and opportunity costs

Unless you have a no-penalty CD, an early withdrawal penalty will be charged when you cash out your CD early. Most penalties are equal to several months’ worth of simple interest (depending on how long the CD’s term is) and will be deducted from your balance. If your earned interest doesn’t cover the full penalty, the rest will be taken from your principal.

That’s the worst that could happen to you. Ideally, your earned interest would cover the penalty. But if it doesn’t, you could lose money.

You also have to think about opportunity costs. This would be the interest you could have earned had you kept your CD contract intact.

For example, let’s say you put $10,000 in a 12-month CD last month, when rates were 5.25%. At this point, you would have earned one month’s worth of interest, or roughly $43. If the CD had an early withdrawal penalty of six months, you’d pay about $260 to cash out early. Subtracting the interest you’ve earned, your total penalty is $217.

But that’s not the full picture. You’re also missing out on another 11 months of interest. If you had left the CD alone for the full term, you would have earned about $482 more. With penalties and opportunity costs, you’re looking at a price of almost $700 to cash out early.

When cashing out your CD is worth it

In most cases, it makes financial sense to let your CD mature. Cashing out early will result in a hefty penalty. That said, there are some scenarios in which cashing out early will make the most sense for you.

The most common is emergency expenses. If you’re facing a medical bill, car repair, or other unexpected expense, you might have to dip into your CD to foot the cost. Although using a credit card with a long 0% APR period could be another option, even that will only postpone the day when you have to pay interest on your charges. At any rate, it’s better to dip into your CD than to face the hefty interest rates on loans and credit cards.

Another reason to cash in your CD is to pursue better financial opportunities. For example, let’s say you want to use your CD money as a down payment on a house. If you decide that the early withdrawal penalty pales in comparison to the interest that you can save by putting more money down, it might be worth paying the upfront cost to do it.

Ultimately, personal finances aren’t black and white. While cashing out a CD could lead to penalties and missed opportunities, it could also make financial sense. Examine your options — including credit cards — but don’t beat yourself up if you need to access this money for an emergency.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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A Costco membership gets you access to great deals, including on gift cards. See which discounted gift cards you should buy at Costco. [[{“value”:”

A Costco membership has lots of money-saving benefits. One that sometimes gets overlooked is its gift cards, which are available online and in stores. Many of these are discounted by 10% or more, so buying them is another smart way to maximize your savings at Costco.

The best Costco gift card deals depend on what you’re looking for. Buying discounted gift cards only makes sense if you’re going to use them. Here are five often overlooked gift cards worth checking out.

1. inKind Restaurant

Discount: 30% ($69.99 for a $100 inKind Restaurant gift card)

Restaurant gift cards can be hit or miss. Unless you go there all the time, or you have reservations coming up, how sure are you that you’ll use it in the near future?

An inKind Restaurant gift card is different, because you’re not limited to a single restaurant. It’s redeemable at thousands of them across the United States. That includes cafes, bars, and Michelin-starred restaurants. If you like to go out to eat, you shouldn’t have any trouble using this gift card.

2. Nintendo eShop

Discount: 10% ($89.99 for four $25 Nintendo eShop gift cards or $179.99 for four $50 Nintendo eShop gift cards)

As someone who bought a Nintendo Switch during the pandemic, I’m a big fan of these Nintendo eShop gift cards. It’s not the biggest discount that Costco offers, but it beats paying full price for Mario Kart.

3. Uber and Uber Eats

Discount: 20% ($79.99 for two $50 Uber gift cards)

If you regularly use Uber, either for rides or food orders, it’s a good idea to pick up Uber gift cards when they’re available at Costco. You can buy a two-pack of $50 gift cards every 14 days. They’re valid for Uber rides and Uber Eats orders.

4. Domino’s

Discount: 25% ($74.99 for four $25 Domino’s gift cards)

Costco’s pizza deals aren’t just available in the food court. It also has heavily discounted gift cards for a couple of popular national pizza chains. The biggest discount is for Domino’s, where you can get $100 worth of gift cards at 25% off. If you prefer Papa Johns, Costco also has a good deal on gift cards there, too: Four $25 gift cards for $79.99.

5. Cinemark

Discount: 20% ($39.99 for a $50 Cinemark gift card)

Going to the movies is expensive, but you could save some money by getting a gift card first and using that to buy tickets and refreshments. This Cinemark gift card is redeemable for movie tickets, food, drinks, and merchandise. More of an AMC fan? For the same price of $39.99, Costco sells two standard/digital movie Black Tickets plus a $20 e-gift card redeemable for tickets, concessions, upgrade charges, and online redemption fees.

A smart savings opportunity at Costco

Costco offers a ton of gift card deals. It’s worth checking out what’s available on occasion to see if there are any you can use.

Keep in mind that you can earn rewards on gift card purchases, too. If you have a Costco Executive membership, you’ll earn 2% on gift card purchases, with the exception of Costco Shop Cards. If you pay using any of the top credit cards for Costco shopping, you could earn another 1% or 2%. By stacking these rewards opportunities, you can save even more money overall.

Top credit card to use at Costco (and everywhere else!)

We love versatile credit cards that offer huge rewards everywhere, including Costco! This card is a standout among America’s favorite credit cards because it offers perhaps the easiest $200 cash bonus you could ever earn and an unlimited 2% cash rewards on purchases, even when you shop at Costco.

Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Budgeting does not have to be that painful. Keep reading to learn how a budget can become a helpful tool, rather than a tight noose. [[{“value”:”

Let’s face it: Most of us don’t like the idea of budgeting, or as I sometimes call it, “the B word.” The B word scares people because it often feels like a restrictive covenant on your checking and savings accounts. But that is not an optimum way to look at either the B word or the deed itself.

Maybe some re-framing is in order?

I practiced bankruptcy law for many years, and I often had to suggest to clients that they needed to be on a budget (they didn’t like that, even though 74% of Americans have a monthly budget.)

But what I told them, and what I am telling you, is that a better way to think of the B word, is not as a noose, but rather as simply a tool, one that you make for your benefit, designed to assist you in prioritizing what is financially more and less important to you. That’s it.

A budget is not about saying no to the things you enjoy, it is about saying yes to the things that are most important to you. After all, it is your budget, so why not make it work for you?

Let’s look at three common budgeting mistakes and how to avoid them.

1. Not being realistic

One of the biggest budgeting mistakes people make is creating a plan that is either too strict or too unrealistic. Both are fails.

Many people approach budgeting as if they are setting up rules that cannot be broken. They thereafter expect themselves to cut out every indulgence or unnecessary expense. This is a prescription for failure; it’s a budget that can only lead to frustration and, ultimately, the abandoning of the budget altogether.

Instead, build flexibility into your budget. Yes, you can — it is your budget after all. As such, make sure it reflects your true spending habits. If you love getting your daily coffee, that is just fine. Build that in. Make it a priority.

But in exchange, something else will need to go. That is OK, too. An honest budget is a tool that helps you prioritize. By being realistic, you are more likely to stick with it and stay on track.

2. Not accounting for irregular expenses

Another common mistake is not planning for irregular or one-time expenses, such as home repairs, annual auto insurance premiums, or holiday spending. When these costs arise, they can blow your budget out of the water if you have not prepared for them.

The solution? Set aside a small amount each month to cover these sorts of irregular expenses. By putting aside a little bit of money regularly, you will have a cushion when those larger expenses pop up, making them less of a burden on your monthly budget.

3. Failing to track your spending

While creating a budget is a fine first step, that is all it is. The real challenge is sticking to it, and the only way to do that is by consistently tracking your spending once the budget is in place. So the mistake here is that, after setting up a budget, you fail to track your spending. You won’t know if you are staying within the budget, and you won’t be adjusting as necessary.

See the problem? Without monitoring where your money is going, it is very easy to overspend in certain categories.

The good news is that tracking your spending does not have to be time-consuming or tedious. Simply deploy one of the many available budgeting apps to log your expenses. In fact, if you make it a habit to check in regularly in order to ensure you are staying within your limits, you can almost make a game of it. Knowing where your money goes will help you stay in control and make adjustments as needed.

Making your budget work for you

Ideally, you now see that your budget can and should reflect your financial priorities, not your money fears. Think of it as a tool to help you focus your money on what is most important to you.

If you do that, and learn to view budgeting in a new way, then what you should also discover is that the B word just might become the W word (Win).

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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It’s important to be strategic with your money now that rates are lower. Read on to learn more. [[{“value”:”

It was bound to happen. After months of speculation, the Federal Reserve lowered its benchmark interest rate by half a percentage point on Sept. 18. This move was long anticipated, and it’s apt to impact consumers.

On the plus side, lower rates on the Fed’s part can lead to less expensive borrowing. Following this cut, everything from credit card balances to mortgages to home equity loans could get a notch cheaper.

On the other hand, the Fed’s rate cut will drive savings account and CD rates downward. So while borrowers stand to benefit, savers lose out.

If you have $1,000 at your disposal, it’s important to put it to work strategically now that the Fed is cutting interest rates. And here’s one potentially lucrative option worth looking at.

Put your money to work in the stock market

You could put $1,000 into a 12-month CD paying 4.50% APY, which is a rate you’re likely to find today. That puts $45 in your pocket after a year. But an even better bet is to invest that money in the stock market.

Over the past 50 years, the stock market has rewarded investors with an average annual 10% return. And that 10% accounts for years when the market was strong as well as years of declines.

If you put $1,000 into a stock portfolio, you may not earn a 10% return your first year. Unlike CDs, stocks don’t guarantee you any specific return.

But if you put that $1,000 into a stock portfolio and let that money grow over 10 years or more, there’s a good chance you’ll snag a 10% return on average as well. And the longer you let your money grow, the higher a total return you stand to walk away with.

In fact, let’s say you put your $1,000 into the stock market this month and leave it alone for 30 years. If your portfolio returns 10% a year, you’re looking at about $17,450. And if you divide $17,450 by 30, you’re gaining an average of about $582 per year. That’s far better than the $45 you might get out of a CD in the coming year.

Make sure you’re comfortable with a long-term investment

Investing in stocks is a great way to grow your wealth over the long term. But before you put any money into stocks, make sure you’re on board with leaving it where it is for 10 years or longer.

Since the stock market can be volatile, you need time to ride out the downturns. If you think you might want access to your $1,000 within a couple of years, then a CD is a better bet than a stock portfolio, even now that rates are lower. That’s because your principal CD deposit is protected as long as your bank is FDIC insured and your balance is not more than $250,000.

But otherwise, you stand to gain a lot by sticking with stocks for the long haul. If you’re willing to sit tight, you might be amazed by your results.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Is car insurance wrecking your budget? Learn how Americans are taking desperate measures to save money on car insurance. [[{“value”:”

Car insurance has gotten so expensive in the past few years that some Americans are taking extreme measures. A new survey from Jerry shows that high car insurance prices are taking a big toll — 17% of Americans have chosen to go without car insurance because of unaffordable premiums.

It’s understandable that some Americans are feeling big financial stress from car insurance costs. But going without car insurance is a bad decision. Don’t do this! Even if it’s for a short time, drivers who choose to skip car insurance are putting themselves at risk for catastrophic costs and legal consequences.

Let’s look at a few extreme ways that Americans are coping with high costs of car insurance — and what drivers should do instead.

Car insurance prices are forcing Americans to cut spending

A new survey from car ownership app Jerry found that Americans are suffering from the high cost of car insurance. Approximately 74% of people said that car insurance has become unaffordable for the average American family.

Here are a few ways that Americans are trying to make up for high car insurance costs, according to the Jerry survey:

60% of drivers settled for less auto insurance coverage than they needed.22% of drivers chose a higher deductible on their auto insurance — but 40% don’t have enough money in the bank to cover the deductible if they got in a crash tomorrow.57% of Americans are cutting back on other spending because of high car insurance costs — for example, 24% of people are spending less on groceries.

Most American communities were built for cars and lack high-density, affordable, convenient public transit. Car insurance is a necessity for many people’s everyday transportation in America. Unfortunately, car insurance has become so expensive that many Americans are forced to cut back on other essentials so they can keep driving.

17% of Americans have gone without car insurance

One of the most troubling stats from the Jerry car insurance survey is how many Americans are choosing to go without car insurance altogether. Of those surveyed, 17% told Jerry that they have gone without car insurance for some period of time within the past 12 months — up from 11% one year ago.

Going without car insurance is a huge risk, because it leaves drivers unprotected from the catastrophic costs of a car crash. Drivers who get in a crash while uninsured are likely to be on the hook for thousands of dollars’ worth of car repairs, and potentially tens or hundreds of thousands of dollars in medical bills and legal fees.

And even if drivers don’t get in a collision while uninsured, in most states, driving without car insurance is a crime. Choosing to go without car insurance can lead to fines, driver’s license revocation, and even jail time.

6.7% of drivers lied to car insurance companies

Another shocking stat from the Jerry car insurance survey: 6.7% of Americans admitted to providing false information (lying) to car insurance companies to try to get cheaper car insurance. Just like going without car insurance, this is also a bad decision. It’s also considered insurance fraud, which is a crime.

Lying to insurance companies during a car insurance application is known as “soft fraud.” It could include lying to insurance companies about where a driver lives or where a car is located, or lying about the number of drivers on an auto insurance policy.

Car insurance fraud is a crime in all 50 states, and it can lead to substantial fines and years in prison. It also drives up costs for other drivers, as the insurance industry must raise its prices to cover the losses from fraud. It’s disappointing to think that so many Americans are feeling stressed enough by expensive car insurance that they would rather take a chance on going to prison.

The right way to get cheaper car insurance

Going without car insurance or committing fraud should never be considered valid ways to save money. Instead, more drivers need to shop around for auto insurance price quotes.

Different auto insurance companies have different ways of evaluating and pricing risk. Even if a driver’s current auto insurer has raised its rates, other companies might be willing to give that driver another look — and offer a lower premium.

Bottom line

Don’t go without car insurance, and definitely do not lie to car insurance companies. It’s frustratingly expensive to be a car owner in America right now, but committing crimes is not the answer.

And even if a full coverage policy is too expensive, most drivers should still be able to find an affordable liability auto insurance policy that meets state minimum requirements and fits their budget. Drivers who have accident history can often get insurance from a state-assigned risk pool for high-risk drivers. This is a better option than committing fraud or going without coverage altogether.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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